Understanding Alternatives’ Speak
As more investors look to alternatives to help them reach their investment goals, education is key to success, as is partnering with an experienced investment manager. PIMCO has been managing a broad range of private alternative strategies for more than 15 years. Our formidable market presence and dedication to superior results gives us a competitive advantage – one that we believe benefits our clients.
Use the glossary below to get familiar with the key terms used in private alternatives space.
Alternatives Glossary:
CAPITAL CALL
Capital is periodically called down by the fund as investments are made; they take place during the investment period specified in the fund terms enabling the money manager to invest capital when appropriate. Private equity funds typically have a capital call structure.
CAPITAL COMMITMENT
Amount of capital committed to the fund over a multi-year time period. (In PIMCO funds, we charge fees on called capital not committed.)
CARRIED INTEREST
The general partner’s share of the profits, which are based on the investments in the fund and can range from 10% to 30%.
CLAWBACK
Provides limited partners the right to recoup a portion of the general partner’s carried interest where subsequent losses mean the general partner received excess fees.
DRAWDOWN
Wherein the manager draws down capital or calls capital to invest in specific deals.
FUND LEVEL GATE
Provision whereby the fund limits the aggregate amount all investors are permitted to redeem (e.g., interval fund that provides 5%-25% quarterly redemptions of outstanding shares).
GENERAL PARTNER (GP)
Fund sponsor/asset manager (i.e., PIMCO); responsible for managing the investments in the fund.
GP CATCH UP
After the investor receives their return of called capital and the preferred return, the manager (GP) then “catches up” to receive a portion of the profits before splitting the subsequent dollars, typically 80/20.